When you are out shoveling snow and scraping ice off the car’s windshield, winter can seem like an eternity. Yet when it comes to your credit profile, house-hunting and the spring real estate season is just around the corner.
“Warm weather will bring an increase in homes on the market and buyers shopping, so it pays to take steps to make sure your credit profile is in the best shape possible if you’ll be looking for a house come spring,” says Barrett Burns, president and CEO of credit score model developer VantageScore Solutions. “Real estate experts are already predicting that this spring will be an important season for the industry, with mortgage rates still low and prices creeping back up. In addition to other criteria such as down payments and income, a good credit score can make a big difference when it comes to getting a mortgage at favorable rates.”
VantageScore Solutions recommends home buyers start now to prep their credit profiles before the spring real estate season arrives in March and April. Here are some tips and tidbits to keep in mind as you’re working toward qualifying for a mortgage loan:
• It is essential to know what’s on your credit report before it will be viewed by potential lenders. Make sure your credit report is up-to-date and accurately reflects your credit behavior. You can obtain your report at AnnualCreditReport.com, the only official site where you can obtain your report every 12 months for free from each of the three major credit reporting companies (CRCs), which are Equifax, Experian and TransUnion. And you can access your credit score through all three CRCs from the same website for a small fee.
• Creditors are interested in seeing how you manage credit, and the consistency of behavior counts. In addition to paying your bills on time every month, avoid applying for any new credit between now and the time you will apply for a mortgage. Almost every credit score “inquiry” from a lender is recorded with one or more of the three national CRCs. This can result in a decrease to your VantageScore credit score by 10 to 20 points.
• Keep in mind that some lenders will pull a credit score at the time you apply for the loan, then again just before the loan closes. You want to avoid credit score reductions during that time frame, which can occur if you take on unnecessary credit. Also be sure all payments on existing debt are made on time during this timeframe.
• Shop around for mortgage options before you actually apply. Understand lenders’ qualifying criteria so you know where you may need to improve. Once you’ve done your research, go ahead and apply to multiple lenders all at once. Multiple applications at the same time will register on your credit report as a single inquiry – as long as they’re all within 14 days of each other – and will have minimal impact on your score.
• Different lenders use different scoring models and different models can have different score ranges. For example, the VantageScore model’s range is 501 to 990. You may or may not be able to find out from your potential lender which model they use. What’s important is where you fall in the model’s score range, which tells you how your score compares to others.
Finally, Burns says, don’t worry too much over small fluctuations in your score. “It’s possible for your score to be 772 on Thursday and 765 on Friday,” he says. “It may be back up to 770 the next week. The changes are likely due to updates to your credit files and expiring data. Remember that consistent, responsible behavior is more important than small ups and downs in your credit score.”
For more information and tips on how to get your credit ready for spring real estate season, visit www.VantageScore.com or test your knowledge about credit scores at www.CreditScoreQuiz.org, which was created by VantageScore Solutions along with its partner, Consumer Federation of America. Both websites are completely free and neither display any advertising nor collect any personal data. Both the online quiz and a corresponding brochure are available in Spanish at www.creditscorequiz.org/Espanol.